1.4.1 The options for startup and small businesses

What is a sole trader?

A business owned by one person

What is the liability of a sole trader?

Unlimited liability

What happens if a sole trader's business has debts?

Owners may lose personal assets

What happens if a sole trader's business has debts?

Owners may lose personal assets

What are the advantages of being a sole trader?

• Quick and easy to set up

• Owner keeps all profits

• Flexible working hours

What disadvantages of being a sole trader?


• Unlimited liability

• Hard to raise capital

• Limited skills and management

What is a partnership?


A business where partners share responsibility

What happens to profits in a partnership?

Profits are shared among partners

What are the advantages of partnerships?

• Shared decision-making

• More capital available

• Shared risk

What are the disadvantages of partnerships?


• Unlimited liability

• Profits shared

• Disagreements may occur

What is limited liability?


• Owners cannot lose more than their investment

• the business and owners have separate legal liability so the owners cannot be sued for debt

What is unlimited liability?

• if the business fails the owners must pay debts

• if the debts are large then the business owner may have their house or other assets seized to pay the bills /debt

• in the eyes of the law the owner’s personal bank account and their business bank account are the same

What is a Private Limited Company (Ltd)?

A company with limited liability for owners

How can a Private Limited Company raise capital?


By selling shares to friends and family

What is a disadvantage of a Private Limited Company?

Profits need to be shared among owners

What is a Public Limited Company (PLC)?

A company that sells shares publicly

What is a disadvantage of being a PLC?

Loss of control over the business

What is a franchise?

A business licensed to operate under a brand

What are the advantages of a franchise?

Group advertising and brand recognition

What is a disadvantage of a franchise?

Less control for the business owner

What is a royalty payment in a franchise?

Payment to franchisor based on sales

What are the roles of franchisor and franchisee?

• Franchisor: Offers franchise rights and support

• Franchisee: Buys the franchise and operates it

What is the first time shares are sold on a stock exchange called?

Stock flotation

What is a disadvantage of a PLC regarding financial information?

Must publish accounts for public view